Farming businesses are often a family affair that span generations; fathers, mothers, brothers, sisters, may all have a share in the land and the business. These complex ownerships can pose issues in several areas but nowhere more so than in the breakdown of a relationship or divorce.
What makes farming divorce cases complicated?
There is no particular difference in how a farm is dealt with by law in a divorce. The difficulty is that they are often a lot more complicated due to several key issues that can affect how the matrimonial assets are worked out and divided:
- Liquidity: often assets held within a farm are tied up and not easily realisable.
- Farming families can be capital rich but income poor.
- Inherited assets/generational farms for example, if the farm has been handed down through the generations and is to be preserved for the next.
- Any impact upon third parties, for example, parents, sisters and brothers who may live on or be involved in the ownership or running of the farm.
- A reliance upon farm subsidies that affect the revenue of the farm.
- The existence of family farm trusts and/or complex ownership structures.
- Tax, such as capital gains tax and/or inheritance tax.
With such complicated assets and structures, it is crucial to instruct a solicitor that is a specialist in dealing with farming divorces and who has a good understanding of agriculture and how farms work.
What factors are considered in the divorce?
One of the biggest questions running through these types of cases is “what the parties’ needs are and how can they be met?”
The starting point is to define the assets and then look at how to share those assets built up during the marriage. The Courts ultimately have a wide discretion in order to achieve fairness. Fair, however, does not necessarily mean equal and farming cases do merit special consideration including:
- Inherited assets are often treated differently and are not subject to the sharing principle in the same way.
- A farm owned by the wider family, with siblings and/or parents, will require careful thought as Courts are reluctant to damage the livelihoods of other third parties.
If there are enough liquid assets to go around, the Court can depart from equality in order to protect any inherited element.
How to protect your clients
Clients in farming should consider a prenup agreement to evidence what is intended from a financial point of view if the marriage ends. This will save time, stress and money in the future. It is also possible to put assets in trust for future generations.